Re: st: Critical values for stock and yogo test when the clusteroption is used

["Danny Cohen-Zada" <danoran@bgu.ac.il>]

Dear Professor Austin and other statalist subscribers

I only want to add that in the email today I clarified something that wasn't 
clear enough in the private mail yesterday. The points is that the results 
much differ if I use the clustered f-statistic instead of the regular one.
The regular f-statistic is 158 which is extremely above the regular critical 
value (the critical values are between 5.53-16.38). This indicate that the 
instrument is extremely strong. However, if i compare the clustered 
f-statistic (5.26) to the regular critical values I may come to an opposite 
conclusion that my instrument is quite weak (it is only close to the 25% 
maximal iv size). Should i worry about the strength of my instrument? After 
all, i guess that as the clustered f-statistic is much lower than the 
regular one, the clustered critical value should also be lower? That is, 
don't we require to much when we compare the clustered f-statistic to the 
regular critical values.

Best,

Danny


----- Original Message ----- 
From: "Austin Nichols" <austinnichols@gmail.com>
To: <statalist@hsphsun2.harvard.edu>
Sent: Wednesday, February 27, 2008 3:36 PM
Subject: Re: st: Critical values for stock and yogo test when the 
clusteroption is used



> All--
> My reply (Tue, Feb 26, 2008 at 4:42 PM) to this interlocutor's private
> email yesterday was:
> ***************
> Until someone redoes Stock and Yogo with various kinds of clustering,
> you are stuck comparing your value to their table.  One reason no one
> has done that is that different kinds of clustering might produce
> different answers, so the critical values might be more
> problem-specific, and you might have to run your own simulations for
> your own case, using observed intra-cluster correlations in the data.
> ***************
> If anyone has a different answer, I'd be interested to hear it.  Note
> that the ref for Stock and Yogo is in the help for -ivreg2- on SSC and
> in http://www.stata.com/meeting/5nasug/wiv.pdf.
>
> On Wed, Feb 27, 2008 at 7:33 AM, Danny Cohen-Zada <danoran@bgu.ac.il> 
> wrote:
>
> > I would be thankful to anybody that can give me an advice concerning the
> >  critical values in the stock and yogo test.
> >
> >
> >  I estimate the following IV model with the cluster option
> >
> >  ivreg2 y1 x1 x2 (y2 =  z1 ), ffirst cluster (x3)
> >
> >  (In my model I have only one endogenous regressor and one excluded
> >  instrument).
> >
> >  I know that the Stock and Yogo statistic assume conditional 
> > homoskedasticity
> >  and independence. Since I use the cluster option I can not use the 
> > reported
> >  stock and yogo statistic (f statistic on the exluded instrument)  and 
> > the
> >  reported critical values.
> >
> >  I know that I can use the command ffirst to obtain the corrected f 
> > statistic
> >  on the excluded instrument. It differ substantially  from the 
> > unclustered f
> >  statistic (regular = 158, clustered=5.26, the regular critical values 
> > are in
> >  the range 5.53-16.38). However, I still have a problem because I do not 
> > know
> >  what the corrected critical values are (I guess that I can not use the
> >  regular critical values). If i used the regular f-statistic and the 
> > regular
> >  critical values i find that my instruments are very very strong. This
> >  picture is changed if i compare the corrected f-statisticto the regular
> >  critical values.
> >
> >  I would be thankful to anybody who knows how I can check that my 
> > instruments
> >  are not weak in a regression where the cluster option is used. 
> > Specifically,
> >  to which value should I compare the corrected f-statistic on the 
> > excluded
> >  instrument obtained by the command ffirst.
> >
> >
> >  Best,
> >
> >  Danny
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